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EBays Strategy in China Alliance or Acquisition Case Solution
| Solution Id | Length | Case Author | Case Publisher |
|---|---|---|---|
| 672 | 662 Words (2 Pages) | Lu Jiangyong, Zhigang Tao, Isabella Chan | University of Hong Kong : HKU701 |
A Word File
e-Bay was started in the United States as an online alternative to auctioning new and used items, of varying types, and was quick to meet success thanks to it’s the dedicated efforts of a very experienced top management. The company was soon able to capture large portions of market share, and began expanding its services to include fixed price sales, etc. Within three years of starting, the company began to expand internationally and was immensely successful in European markets. In line with its expansion efforts, powered by its precious successes, e-Bay decided to enter the Chinese market. The company only had to come up with the most efficient way to do so, given the dynamics of the rapidly growing Asian market.
Following questions are answered in this case study solution:
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Introduction
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The Options
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Market Reality and Problems
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Conclusion
eBays Strategy in China Alliance or Acquisition Case Analysis
2. The Options
The most direct mean of entering the Chinese market is through direct investment. This would be the equivalent of e-Bay creating a new subsidiary in China by investing in creating new operation networks and web elements. This also entails that management will remain directly in the hands of e-Bay’s US offices and that the subsidiary will be staffed with local and foreign employees.
The second option is to enter the market through the acquisition of a local entity that has an established operational network. This would be the equivalent of e-Bay’s acquisition of EachNet. In this method of entry e-Bay only retains supervisory control over its subsidiary, whose management is still in control of the day to day activities. The entrant can benefit from the established operations and expertise of the employees of the acquired company.
The third option is to make an alliance or enter into a joint venture with a local company. Alliance and joint ventures only differ in their legal aspects. Their basic functionality and benefits and risks are mostly similar. In this process, the subsidiary retains decision making authority and the entrant can only exercise control through mutual agreement. This method of entry is also the least capital intensive as it only requires a portion of the investment required in the above mentioned strategies.
3. Market Reality and Problems
The Chinese market is different from the US market on multiple levels. The most basic difference is that of facilities available to both the businesses and the consumers. Internet speeds and accessibility are much lower in China than in the US. Even though the Chinese internet user base is increasing manifold year to year, their access is limited and often depends on amenities like internet cafes, etc.
The general management style and management policies used to run the operations of businesses in China are also significantly different from those in the US. The Chinese work culture is, for example, is much less individualistic in nature than its US counterpart.
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